Ethanol's Excedrin Headache: Where Have All the Good Sites Gone?

OK, so you've raised $100 million to build your ethanol refinery that was to be an outlet for struggling farmers, a boon to the local economy and a reducer of greenhouse gases. You spent years fundraising. You sold your soul and your proprietary technology to lenders. You paid a fortune for lawyers to get you through the due diligence, permitting and political hurdles. You're finally ready to break ground or you already have. Then, cue the music from "Jaws." Here come the plaintiffs.
By Sarah Smith | March 10, 2008
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Across the United States, from coast to coast, ethanol enthusiasts, regarded as the fair-haired boosters of the rural economy, are being plagued by lawsuits seeking to delay or derail plant development entirely. Plaintiffs swap strategies over the Internet, trade petition forms, success stories, failures, even going so far as to design T-shirts and coin the perfect acronym for their groups. Their reasons for filing causes of action are as myriad as the ethanol technology itself: not in my back yard, zoning board decisions, economic benefit, industry distrust, environmental concerns and water use issues. The view from the third tee box, listed in one cause of action, illustrates the lengths plaintiffs will go to halt a project in its tracks. After all, golf is life, isn't it? Then there are the Trout Association's objections to a Minnesota plant. Don't try to interfere with a man and his floating
Rapala. "Nobody wants to look out their window and see an ethanol plant," says Nathan Schock, director of public relations for South Dakota-based Poet LLC.

Even where courts have found their claims baseless, plaintiffs often still prevail. They've prolonged construction to the point where it's prohibitive to continue. Or litigation costs have eaten significantly into the overall budget, which was scrawny to begin with. Or they haven't killed the project entirely, but just forced it to move on down the road and back to square one. It's enough to make a project developer reach for the Excedrin bottle, or maybe something stronger.

"It's a quandary," says Steve Snyder, an Indiana development and zoning attorney. "Ethanol plants need rail access, reasonable access to truck transportation and some type of municipal services—water or sanitary service. With the abandonment of an awful lot of rail lines, those sites are becoming pretty limited. Site selection is the key but it's very difficult."

State-By-State Objections
Currently, EPM has identified organized opposition in at least 14 states. It signals a change akin to having the welcome mat yanked out from under you, or the massing of a litigation army. Rural communities that once heralded the arrival of an ethanol plant are now thumbing their noses at them. Here's what's happening:

› California
Production at Cilion Inc.'s 55 MMgy facility, due to open sometime this spring, may be delayed by a lawsuit over the county's decision not to require a formal environmental impact statement (EIS) prior to construction. Cilion plant spokesman Jeremy Wilhelm says the company won't comment on pending litigation. The plant was 50 percent complete when the Valley Advocates issued a legal challenge in late 2007. The plant is located in Keyes, near Modesto. Valley Advocates have cited air pollution concerns resulting from manufacturing.
County supervisors gave the green light to plant construction in June 2007 despite objections at that time over the lack of an environmental report. Ground was broken two months later. A county attorney said the plant was properly located in an industrial zone, which doesn't require an EIS. As of press time, the case was still pending.

In a second action, American Ethanol's plans to construct a plant west of Santa Maria has run into opposition from residents concerned about odors and truck traffic. Santa Maria residents are tenacious. When a feedlot smell became intolerable a few years ago, residents voted to form a special district, taxed themselves and bought the offending business out. In mid-February, American Ethanol President Dave Baskett wrote an opinion column in the local newspaper addressing odor, water and energy concerns. He stressed the importance of "creating local renewable fuel."

› Florida
A developer trying to build the state's first ethanol plant was stymied by a lawsuit seeking to derail Port Sutton EnviroFuels from proceeding with an $86 million facility in Tampa's port. Plans for the Tampa facility were first announced in 2005, and production was initially slated for fall 2007. EnviroFuels, after 16 months of litigation, finally got a judge to sign off on terms of a negotiated settlement in late November 2007. PEL Laboratories, an environmental testing firm, filed for an injunction because it contended that the plant, which surrounds PEL on three sides, would hamper its business and that plant emissions might undermine sensitive water and soil testing PEL conducts for military and commercial customers. A sealed agreement keeps the settlement terms confidential.

The settlement "will not cause us to do business any other way," says EnviroFuels President Bradley Krohn. "This was a frivolous lawsuit." EnviroFuels, which had to relinquish funding for the 44 MMgy plant, now has to start fresh trying to raise money to build. The plant was fully permitted and financed when PEL filed suit. Krohn remains optimistic the company will break ground this year but he admits to being frustrated that "the lawsuit kept plans in a holding pattern for 16 months." PEL did not return calls seeking comment.
EnviroFuels halted plans to build a second plant near Port Manatee after land acquisition dealings stalled. Instead, it has turned its attention to defending the lawsuit over the Tampa plant.

› Georgia
A proposed plant in southern Georgia is in its third site choice, near Sycamore, after initial land resources in two other counties were deemed inadequate. Georgia Alternative Energy Co-op needed land near railroad tracks, the availability of gas and a suitable sized parcel. It has been granted a permit, but the siting process has already consumed a year—and opposition is mounting from Sycamore residents who voiced concerns at the permit hearing over diminished property values, traffic, water contamination, pollution and public safety.

› Illinois

Waverly Ethanol is mired in a zoning lawsuit with no end in sight. Opponents say industrial property is available rather than the proposed site near the county elevator for the 200 MMgy plant. No trial date has been set.

› Indiana
More than 200 Starke County residents petitioned to halt a 27 MMgy waste ethanol facility near San Pierre. Their objections are water consumption, pesticide discharge and truck traffic.

Kim Ferraro represents the Kankakee Valley-Stop the Ethanol Plant (KV-STEP) plaintiffs. Ferraro filed the petition Dec. 6, 2007, seeking judicial review of the Stark County Board of Zoning Appeals' decision to grant the permit for the plant, being developed by Bio-Energy Development Co. LLC. As of press time, the court had not ruled on its merit.

In another case, the proposed NuFuels LLC complex that would have been home to a biodiesel facility, ethanol plant, and research and development center near Huntington has been delayed nearly two years by citizens leery of the environmental impact. NuFuels has expressed a desire to move forward. The lawsuit is still pending.

In 2006, residents of Milford successfully squelched a VeraSun Energy Corp. proposal to build a plant nearby. Attorney Snyder was peripherally involved, although he didn't represent VeraSun. He was, however, instrumental in getting the zoning changes to facilitate the plant's location in Milford. Those changes were patterned after ordinances Snyder had drafted in southern Indiana to assist a biodiesel plant locating there. VeraSun didn't enjoy the same success. "The residents got up on their hind legs and objected to it, essentially not knowing what they were objecting to," Snyder says. "VeraSun just backed off and said, ‘If we're not welcome we don't want to be here,' and they abandoned the site." In December 2007, VeraSun Tilton LLC purchased multiple parcels of farmland in neighboring Illinois for construction of a plant there.

› Iowa
Plans for a proposed plant near Grinnell came to a screeching halt when opponents filed suit over various zoning issues. Residents near the plant claimed that their property values would suffer if the plant, a joint venture proposed by Big River Resources and US BioEnergy, were to be built. Site work had begun, Securities and Exchange Commission filings were complete but the 100 MMgy plant never materialized. The lawsuit is still pending. Neither side responded to calls seeking comments. US BioEnergy is in the midst of a merger with VeraSun and moving to new company headquarters in Sioux Falls, S.D.

› Kansas
Nearly 500 residents of the semiarid town of Wright spent $100,000 to delay construction of an ethanol plant in a lawsuit they filed over water use, and lost. Their concerns were their water-intensive corn crops, depletion of rural aquifers and memories of the Dust Bowl. Developers of the 110 MMgy Boot Hill Biofuels plant predicted a spurt in employment opportunities and development of new businesses. Construction was to begin in June 2007. But in November 2007 plant developers requested a one-year extension on permits. It was granted. Boot Hill officials expect groundbreaking in late 2008, and blamed poor economic conditions, lack of capitalization and the rising cost of stainless steel as reasons for seeking the delay.

› Minnesota
Jeff Broberg, president of the Minnesota Trout Association, in early 2008 requested that the state Department of Natural Resources support a petition for a general study on the impact of ethanol in the state. His group has partnered with the Olmsted County Concerned Citizens to oppose a plant near Eyota.

Broberg says he organized when he learned of a state goal to increase capacity to nearly 2 billion gallons per year in the next few years. Although Broberg wrote in his petition request that, "We need to question the madness," he says he's not anti-ethanol, but wants the state to find better sites for the plants that will not deplete groundwater, or have a negative residual effect on land, fish and wildlife.

Broberg may have prevailed. The 55 MMgy plant is on hold while the Minnesota Environmental Quality Board convenes a group to study the effects of ethanol on groundwater supplies.

› Missouri
Residents of Webster County successfully delayed a $185 million plant proposed by Gulfstream Bioflex Energy LLC, citing concerns about overextending water supplies, draining aquifers and dotting the landscape with sinkholes—even though company officials promised to dig affected wells deeper or drill new ones for residents near the plant.

The lawsuit has only enriched the lawyers, geologists and hydrologists that have taken up lucrative positions on both sides. In October 2007, after hearing volumes of testimony about aquifer depletion, a judge ruled in favor of Gulfstream. The litigation had been ongoing for two years. The plaintiffs promptly appealed. The appeal was still pending at press time.

› New Mexico
Opponents of a proposed plant near Clovis successfully sent the ethanol developers packing in late January 2008. ConAgra planned to be a minority partner in the Clovis plant, located near a Peavey elevator operated by ConAgra Trade Group. Citizens retained legal counsel when they organized to oppose the site selection near a low-income, minority neighborhood. ConAgra, after a two-year process, decided not to build. In December 2007, the plaintiffs had successfully appealed a decision denying them a second hearing over the plant's permit. ConAgra cited poor economic times as its reason not to build.

› New York
RiverWright Energy LLC's plans are on hold for an $80 million ethanol plant while residents near Buffalo, the self-titled "Birthplace of the Grain Elevator," seek reconsideration of a judge's order allowing the plant to be located in some abandoned grain elevators. Buffalo City Council President and opponent David Franczyk voiced concerns about potential odor, noise and pollution problems. He suggested the city was rubber stamping the project when the permit was approved in May 2007. Although a large neighborhood group supported the project, three residents immediately took their concerns to the courthouse, citing odor and public safety issues. The case is pending.

The 110 MMgy plant was heralded in 2006 as a solution to Buffalo's economic slump since Bethlehem Steel left in 1983, and for bringing life back to a dormant area. Only two of the 17 surrounding concrete grain elevators are operational, and RiverWright planned on using four mothballed silos for its facility, with production to begin in the fall of 2007. It didn't make that target. Craig Slater, RiverWright's attorney says he doubts the appeal will succeed.

› Pennsylvania
Two plants are currently bogged down in this state. Northeast Ethanol is pitted against five unhappy residents of Mayfield challenging zoning changes in its favor. Plant attorney Michael Brier is fighting back aggressively, asking the court to force the plaintiffs to put up a bond for delaying the project by a "frivolous" objection. Plant Developer Richard Scheller has partnered with Delta-T Corp. to design a 60 MMgy facility that he says is odorless, noiseless and vaporless. The plaintiffs say the plant is too close to a heavily-concentrated residential area. Mayfield's City Council has passed a new ordinance allowing the plant. In November 2007, plant opponents elected four write-in candidates critical of the council and refinery. In late February, the 38 acres zoned industrial to clear the way for the plant were zoned back to residential. Scheller says he will appeal the decision. At the first public hearing residents said an ethanol plant was more properly situated in Iowa.

A $100 million plant proposed on the Susquehanna River is on hold while Conoy Township's Planning Commission debates the merits of a petition by Lancaster Biofuels. The council has attached a comprehensive list of conditions to a noncommital resolution that places several additional burdens on the plant developers, who could not be reached for comment.

Another hearing on allowing the plant is set for mid-March.

› Virginia
In late December 2007, Hopewell approved, by a 4-3 vote, building an ethanol plant on its outskirts after months of study and wrangling. Opposition to Osage Bio Energy LLC's 55 MMgy plant immediately mounted from within. Mayor Steve Taylor wondered about the long-term effects. "Ethanol is a short-term solution to our country's problems," he told the local media. "What happens when we find another solution?" City Councilor and opponent Curtis Harris filed an appeal over the site selection after the vote to stall construction, contending the land sale was illegal. Residents had voiced concerns about protecting the city against construction problems, the uncertain ethanol economy and the construction timetable. There was a movement to locate the plant on a different site father away from the city. In mid-February 2008, the State Supreme Court blocked the appeal. Plans to build are moving forward.

› Wisconsin
This state is the site of a long-running battle between Century Foods International, a dairy processor owned by Hormel Foods Corp, and Coulee Area Renewable Energy. Century objected because it contended that plant emissions from the nearby refinery would contaminate its milk-based products. Residents complained that an ethanol plant would spoil the view from the municipal golf course and unpleasant odors might waft across the tee boxes.

In October 2007, plant developers agreed not to build near the food processor. Century agreed to buy the land parcel and drop several lawsuits.

In late 2007, the investors sued Century, alleging the food processor reneged on the agreement and is trying to force Coulee Area from building on other properties it is eyeing. The case is still pending. The plant has been delayed two years.

Previously residents of Cambria mounted opposition to an ethanol plant on the outskirts of town proposed by Didion Milling. Plaintiffs who trade links to various anti-ethanol Web sites pronounced Cambria's "the most comprehensive single Web site on issues surrounding ethanol plants … This community group successfully blocked the establishment of an ethanol plant in Cambria…"

Hold the phone. The protracted wrangling over a 45 MMgy plant actually failed. Didion Ethanol is scheduled to go on line March 1, 2008. Didion Vice President of Operations Dale Drachenberg says at one point, plant supporters staged a tractor parade down Main Street. Local politicians were running for city seats on pro-ethanol and anti-ethanol platforms.

Drachenberg says Didion did everything possible to ensure forward progress during the litigation, including agreeing to use underground tunnels to transport materials. The six-year odyssey, which began in 2002, included a two-year dormant period where Drachenberg says they shelved plans to build altogether, and couldn't even begin to estimate what all the litigation and delays have cost.

Success Stories and Solutions
Plaintiffs in Illinois were unsuccessful in stalling an ethanol plant in Hennepin and Marquis Energy LLC plans on opening in March 2008. Plant founder Mark Marquis refused to be bullied and he met the plaintiffs head-on. "This was a sham lawsuit, it was just a union-busting ploy," he says. Marquis' tenacity paid off. He says the plant's 100 MMgy capacity is on target.

An Ohio lawsuit initially delayed construction of Coshocton Ethanol LLC but was voluntarily dismissed by the plaintiffs with hopes of re-filing it. Contractors persisted and construction was successfully completed. Coshocton began grinding corn for the 55 MMgy facility in late January 2008.

Didion's Drachenberg says he saw a tide of change in Wisconsin that he rode to complete Didion's plant. It helped that another ethanol facility was successfully completed 15 miles away. "People could see that it was nice, clean, quiet—not a behemoth," he says.

The Pennsylvania defense attorney involved in the Northeast Ethanol case may have a partial solution for developers, forcing plaintiffs to post a bond to cover delay costs. Generally courts only permit bonds if injunctive relief is sought but courts may be more receptive to enforcing the posting of a bond if developers can show that delays will cause irreparable harm.

Synder also cautioned that rural zoning authorities need to be monitored for lapses. Many looked the other way when farmers subdivided land into parcels for their children or sold parcels to people who wanted a rural lifestyle. That's what happened to VeraSun in Milford. "All of a sudden the residential density on those farm tracts was considerably higher than 20 years ago and the zoning authorities are in a quandary to protect something they should never have allowed to occur—single family residences in an agriculturally zoned district," he says.

"The number of lawsuits is amazing," Krohn says. "People would rather keep shelling out their dollars to go overseas to the Middle East. I just don't get it."
Schock, of Poet, says "we have a commitment to do a thorough job of education with the public and clear up all those questions." But luck may be the biggest part of the site selection equation.

Sarah Smith is an Ethanol Producer Magazine staff writer. Reach her at [email protected] or (701) 663-5002.